Residents sue to stop Wilson Yard project, claim TIF abuse

(Crain's) -- A residents group has sued to block a major mixed-use development under way on the Wilson Yard site in Uptown, charging that project's developer improperly received a $51-million city subsidy to finance it.

(Crain's) -- A residents group has sued to block a major mixed-use development under way on the Wilson Yard site in Uptown, charging that project's developer improperly received a $51-million city subsidy to finance it.

The lawsuit targets the city's use of tax-increment financing, a popular development tool that critics say has been badly abused by City Hall by diverting hundreds of million of dollars in property tax revenues into favored real estate projects. The residents group disputes the city's contention that the six-acre North Side site would not have been developed if the city didn't provide financing.

"It's a developer's dream to have that large of an undeveloped parcel in the city," says Molly Phelan, president of the group, Fix Wilson Yard Inc. "There's no reason to use TIF funds to have a developer come in and develop this site."

Chicago developer Peter Holsten broke ground this fall on the project on Broadway between Montrose and Wilson avenues, formerly a Chicago Transit Authority train repair shed. The development will include a Target store and 178 affordable and senior housing units.

Mr. Holsten, who controls entities named as defendants in the suit, did not return a phone call seeking comment.

The City of Chicago is also a defendant. A spokeswoman for the city Law Department disputes the allegation in the lawsuit that the city has violated state laws governing TIF districts, but declines to comment specifically on the Wilson Yard project.

In TIF districts -- areas that city officials believe need a development boost -- the city freezes property tax revenue that goes to government bodies, such as school districts. As rising property values generate higher tax revenue, the additional money is set aside for projects, like Wilson Yard, that city officials say wouldn't happen without a subsidy.

The 402 active TIF districts in Cook County generated $892 million in revenue last year, up 11.5% from $800 million in 2006, according to a recent report by County Clerk David Orr.

TIF critics charge that the districts deprive local governments of much-needed revenue and raise money for city officials' pet projects without enough oversight. They also say that many developers that receive TIF grants would have been able to finance the projects without government help.

"When you have a city with a significant budget crisis and underpaid pensions, it's time to stop frittering away the taxpayers' dollars," says Thomas Ramsdell, the attorney representing Fix Wilson Yard, which says it has more than 2,000 members. "You've got a group of citizens who are tired of it and are ready to fight City Hall."

The lawsuit, which was filed Wednesday in Cook County Circuit Court, asks a judge to prevent the city from providing TIF financing to the Wilson Yard project. Among other things, the complaint alleges that the city improperly approved changes to the development--including an increase in its budget to $150 million from $130 million--without adequate review of public input.

Moreover, it charges that the city violated the Illinois Open Meetings Act by not giving enough notice of an October meeting in which the TIF agreement was approved.

Uptown residents "will be irreparably harmed by the illegal diversion of substantial tax revenues from public bodies to private development projects" like Wilson Yard, the complaint says.